Doctors are nervous that Haywood Regional Medical Center will run out of money before fully recovering from the Medicare and Medicaid crisis, forcing the hospital to shut its doors and leaving the doctors with nowhere to practice.

Doctors attempted to convey their grave concern to the hospital board last week, but didn’t get far before board member Jim Stevens objected to letting them speak up during the meeting, prompting the doctors to walk out. (See related article.)

Before things came to a head, doctors told hospital board members they weren’t taking the situation seriously enough. The doctors urged the board to give a higher priority to negotiations about a possible merger with another hospital system to avoid a major financial meltdown.

“Some of the physicians desperately think things cannot continue as is,” Dr. Al Mina, a surgeon, told the hospital board last week.

“We have $5 million in the bank, we are losing million per month, and yet we somehow think we are going to do it on our own?” asked Mina.

At a recent committee meeting of 22 doctors who have been discussing the hospital’s future, the overwhelmingly majority had a vote of no confidence for going it alone.

“The first question was how many physicians think this hospital can continue as is. Two hands were raised,” Mina said.

The hospital lost $1.5 million last year, when there was no crisis to contend with. Mina doesn’t see the hospital starting to turn a profit any time soon, making it only a matter of time until the reserves are gone.

“It doesn’t take a rocket scientist to realize they will run out of money soon,” agreed Dr. Luis Munoz, a pathologist. “They are going to lose money for the next 12 months. I don’t think they understand that.”

Munoz said it doesn’t appear that all hospital board members understand the gravity of the situation or are capable of making the right decisions.

“They ran it aground. They are not going to be able to bring it back into solvency by themselves,” Munoz said.

Some members of the hospital board expressed a similar fear that reserves will run out before the hospital returns to profitability.

“We are in a precarious financial situation. I think we have to make sure we keep the doors of the hospital open,” said board member Pam Kearney. Kearney expressed concern that the whole board is not being kept apprised of the hospital’s financial status.

“As board members, we need to have information. If there is a possibility the doors would close, all the board members would have to know that, not just a small group. We don’t want to be blindsided,” Kearney said.

According to hospital administration, the hospital won’t have to close its doors.

“A plan is being developed to assure HRMC will remain financially viable,” Robin Tindall, the hospital spokesperson, said in an email interview. “The plan will be assessed and adjusted on an ongoing basis. Exact predictions cannot be made, but the facts and numbers will be analyzed and tracked continuously.”

The finance committee, a committee of the hospital board, is currently in discussions with several financial institutions, Tindall said, presumably about options to help the hospital through a cash flow crunch. Tindall said the plan will be shared at the next board meeting.

Kearney, who’s retired from the finance industry, didn’t get far when attempting to extract information on the subject during last week’s meeting, however.

“When will negative cash flow stop?” Kearney asked.

“We don’t have a target date,” replied Mark Clasby, a hospital board member on the finance committee.

Kearney asked for an estimate of when the hospital’s reserves would be gone and whether anyone was working on a back-up plan for that eventuality. But Kearney got little in the way of answers.

“How can the hospital not have a target date of when we are going to run out of money,” asked Dr. Al Mina, a surgeon.

Clasby told Kearney some of her questions would have to be discussed in closed session. Clasby said the hospital had been talking to banks and had some confidential financial information to share.

Merger talks

Many physicians see a merger or affiliation with another hospital or group of hospitals as the path out of the financial crisis. Merger talks are being handled by a committee and are confidential. Most of the hospital board and the medical community aren’t privy to how those talks are going or what entities are involved.

Kearney plied the rest of the board for information on the merger talks, but came up empty-handed, increasing the anxiety level among physicians who perceive nothing is moving forward on that front.

“We have doctors that are very concerned, and if they don’t feel like the hospital is making positive steps to realigning, they may feel compelled to go elsewhere,” said newly appointed board member Roy Patton. “I understand their concern, but at the same time I don’t think we should be in the position of having to negotiate under a gun. Can we hold off these negotiations until we are back on our feet?”

It was a recurring question during the hospital board meeting last week, and one that never was definitively answered. Hospital board Chairman Glenn White said the hospital doesn’t really have a choice but to survive on its own for the time being.

“We have to come back and operate as though we are going to be independent because it will be a while before one of these deals comes together,” White said. “So we’ve got to survive. We’ve got to be able to live or survive until such period of time.’’

Dr. Henry Nathan, a board member and gastroenterologist, said the medical community is nervous.

“There is anxiety among medical staff and anxiety among the rest of the employees,” Nathan said. “There are some that may decide to leave because they just don’t feel confident that what the board is doing is going to be enough, fast enough, so they can practice their profession they way they want to do it.”

But Nathan said he believes the hospital can survive on its own not only in the short-term but for the long-term if that is the decision everyone arrives at.

“My goal is for us to survive and pull through this crisis by ourselves,” Nathan said at the board meeting. “Some people have thought maybe we need to partner tomorrow in order to survive. My hope and suspicion is we can survive this without partnering.”

Nathan could be in the minority, however. Mina pointed out that the national trend is toward hospital groups and affiliations, with few going it alone anymore. If for no other reason, economies of scale are forcing hospitals to work together for everything from bargaining power with insurance companies to supply purchasing, Mina said.

County Commissioner Kirk Kirkpatrick said the future directions committee meets regularly and frequently and has been working hard toward a resolution. He said the hospital has several offers on the table, and the committee is working through them to find the best one. The hospital is in active negotiations with several entities, he said.

“It’s a major decision,” Kirkpatrick said. “It’s which option provides quality health care to the people within the county. That is the key, providing quality health care.”

He envisions a merger or affiliation resulting from the process at the end of the day.

“I think the whole committee is leaning toward an affiliation. I don’t think we would be going through the exercises if we weren’t thinking that was a very sincere option of affiliation,” Kirkpatrick said.

Kirkpatrick said the hospital is an attractive proposition and is in a good bargaining position. It has no debt and great assets, offsetting its lack of cash on hand.

Chasing rabbits

Board member Roy Patton, an attorney, said the issues facing the hospital are overwhelming right now, and trying to solve them all is like “trying to chase several elusive rabbits.” Patton gave a soliloquy of sorts on the hospital’s predicament.

“There are so many things we need to do. We have to get our nurses in. We have to get a CEO in. We have to improve the operations of the emergency department. We have to get the hospitalists back in. Training is essential. We need to see a chief nursing officer. The morale needs to be improved. The quality of care needs to be improved. Everything and all of these issues are going to require an awful lot of money,” Patton said at the board meeting last week.

Prioritizing is difficult, he said.

“These issue are such that some need to be done before others can be done,” Patton said. “We’ve heard nurses aren’t going to come back to the hospital or sign on unless they see an improvement in the morale. And that may not happen until we get a new CEO because of an inherent distrust of the administration.

“Al (Byers) is doing all he can to turn that around, but I’m not sure if he can turn it around totally because he’s been here,” Patton said of the acting CEO AL Byers, who worked closely with the former CEO David Rice.

Meanwhile, the question of whether to merge looms large. Patton said he doesn’t want the hospital to negotiate a merger from “its weakest position,” but the current crisis could force it into that position.

“Can we afford to wait? How about the money infusion? How about the doctors threatening to leave? It is almost a mind boggling task to say what do we do first,” Patton said. “I guess what I am asking is whether or not we are looking at all of the alternatives and trying to decide what the priorities are and what has to be done first. What I’m asking is, are you all doing that?”

After everyone in the room took a breath, Clasby dove in with an answer of sorts.

“All those areas you mentioned are all important,” Clasby said. “We have a number of parallel courses we are pursuing. You can’t slight one of the areas because they are all important.”

Clasby said the hospital is not negotiating from its weakest position. Its weakest position was when it lost its Medicare status. Now it at least has that back.

The hospital board is interviewing CEOs the week of June 14.

Financial snapshot

The hospital technically has $10.8 million left in cash reserves. But of that, $5.3 million is debt: a combination of bonds and loans held by Wachovia. The bank has kept an eye on the hospital’s dwindling reserves and has grown nervous about the hospital’s ability to repay the debt should the cash reserves dip too low.

Wachovia recently asked the hospital to place $5.3 million in an account at the bank, allowing the bank to seize it if need be. Under the arrangement, the hospital would still be able to earn interest on the money.

But the hospital board decided it may as well pay off the debt outright, which it plans to do by Aug. 1. That leaves the hospital with $5.5 million in reserves. The hospital has lost $3 million a month since the crisis hit, burning through a total of $9 million in reserves.

The current balance of $5.5 million in reserves includes losses from May, but not from June. While June financials aren’t in yet, the hospital hopes it will show the tide has turned. For most of June, the hospital had its Medicare status back and was accepting patients again, although the number of patients was limited due to a lack of nurses.

“June patient revenue should be less of a loss as we get back on track, as we add the nurses and can increase the census of the hospital,” Clasby said at the hospital board meeting last week.

At the same time revenue is growing, but so are expenses. The hospital trimmed its payroll during the crisis, from $1.3 million every two weeks to less than $1 million. But as the hospital adds nurses, that payroll is creeping back up, now already up to $1.1 million. The hospital is adding 27 new staff next week, nearly all nurses.

Nurses must go through training before they can be assigned to a floor and accept additional patients. Once they take additional patients, there a lag until money from Medicare or insurance companies actually rolls in. The lag time means the hospital could be paying the higher costs of additional nurses and staffing for a month or more before they have any additional revenue to show for it.

Currently, the hospital is ranging from 35 to 45 patients a day. It’s about half the amount the hospital had on an average day prior to the crisis. Hospital officials said it is turning away patients due to a shortage of nurses.

The hospital will get its first check from Medicare in mid-July, much later than initially hoped for. The hospital passed its inspection on May 22, began accepting patients, and thought payments from Medicare would start arriving within a couple weeks. But Medicare inspectors reviewing the file decided not to pass the hospital after all until a sprinkler head could be replaced. That meant the hospital couldn’t file claims on patients seen prior to June 6, forcing the hospital to absorb the cost of patients being seen since May 22.

With the sprinkler hang-up resolved, the hospital should have started getting its Medicare payments by now, but a paper work snafu developed in getting the hospital’s billing identification number processed. A contract billing company that processes Medicare payments never got a memo that Medicare claims it sent, so it had to be resent, holding up reimbursements until mid-July.

When that first reimbursement comes, the hospital can’t say exactly how much it will be. The hospital expects around $1 million to come in for Medicare patients treated between June 6 and June 22. If the hospital continues with that pace of about $1 million in Medicare payments every two weeks, that will make $2 million for the month of June. That doesn’t include Medicaid patients or those with private insurance, which could amount to another $1.5 million, for a total of $3.5 million in revenue for June.

Expenses will definitely exceed that, however. Expenses were $4.4 million in May when the hospital had a lower payroll and wasn’t treating as many patients.

Revenue vs. Expenses

The hospital trimmed expenses by 33 percent while revenue fell by 80 percent during the month of May compared to a year ago.

Revenue

May 2007: $6.3 million

May 2008: $1.2 million

Expenses

May 2007: $6.6 million

May 2008: $4.4 million